The rate of rental growth in the UK is at its lowest level in over three years at 3.9% down from 9.1% a year ago, Zoopla reveals.

Data shows that the slowdown is due to a narrowing in the imbalance between supply and demand over 2024 and growing affordability pressures on renters in areas with high rents.

The annual cost of rent has increased from £12,000 in 2021 to £15,240, an increase of 27% outpacing the growth in earnings of 19% over the same period.

London has recorded the greatest slowdown, with average rents 1.3% higher over the last year, down from highs of 8.7% a year ago.

London also has the highest rents, averaging £2,190 per month which is 70% higher than the UK average.

Meanwhile, growth is 10.5% in Northern Ireland and 8.7% in the North East.

While the number of homes available to rent is 12% higher than this time last year, Zoopla doesn’t expect any big increase in the number of homes for rent over 2025.

The number of homes for rent remains below pre-pandemic levels in all regions apart from the East Midlands.

Zoopla also expects a continued mismatch between supply and demand with average rents for new lets to increase by 4% over 2025 taking the annual rental cost to £15,850.

It suggests that rental growth in London and larger cities will lag behind the UK average as a result of growing affordability pressures and further modest growth in supply.

Zoopla executive director Richard Donnell says: “Private renters moving home have faced rents rising faster than earnings over the last three years. The number of rented homes hasn’t grown since 2016 creating scarcity for renters at a time when demand has boomed on a strong labour market and the rising cost of home ownership.”

“Rental growth has slowed but we expect an ongoing lack of rental supply to keep an upward pressure on rents.

“The ambitions to expand home building are important as the quickest way to ease the pressure on renters is to boost the supply of private and social rented homes. Private landlords will continue to play an important role and should be encouraged to remain in the market.”

ARLA Propertymark president Angharad Trueman states: “Whilst it is encouraging for renters to see price rises starting to slow down, plus data showing the gap between supply and demand starting to narrow too, there is still much work that needs to be done to ensure that the private rental sector can deliver stability for both landlords and tenants.”

“This ideally should include revisiting tax structures and regulations that are deterring long term investment in the private rental market. It is vital there is robust provision that helps ensure the supply of rental homes grows in line with predicted increases in demand.”

“The Renters’ Rights Bill that is currently being debated in Parliament, which will pave the way for the biggest overhaul in regulations for the rental market in over thirty years must provide fairness and balance moving forward for all involved.”

Meanwhile, Generation Rent chief executive Ben Twomey adds: “Everyone needs a safe, secure and affordable home. But renters across the UK are facing soaring rents which are far outstripping our earnings.”

“The government’s Renters’ Rights Bill is a good start in giving renters more protection from eviction, but there are very few measures in the Bill to give us the breathing space we need from the cost of renting.”

“The government must act urgently to slam the brakes on rising rents, whilst unfreezing the Local Housing Allowance rate will protect families on low incomes from poverty and homelessness.”